Wipro Bonus Issue: A Guide for Investors

Wipro, a leading Indian IT company, has a history of rewarding its shareholders with bonus issues. In fact, the company has issued bonuses to its shareholders 12 times since its listing in 1977.

Bonus issues can be a great way for investors to increase their returns, but it's essential to understand the process and implications.

To qualify for a bonus issue, you typically need to be a shareholder on the record date specified by the company. This date is usually announced in advance by the company.

For example, in Wipro's case, the record date for the last bonus issue was January 15, 2020.

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A bonus share issue is a corporate action where a company rewards its shareholders by issuing additional shares at no extra cost. These shares are distributed in a specified ratio to existing holdings.

The bonus issue is usually announced by the company and is accompanied by a record date, which is the date used to determine eligible shareholders. In Wipro's case, the record date for the bonus issue is December 3, 2024.

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The bonus issue is typically done to increase the liquidity of the company's shares and to reward its shareholders. As a result, the price per share generally drops after the bonus issue.

Wipro's bonus issue is its 14th in history, and it will provide one bonus equity share for every fully paid-up equity share held by shareholders as of the record date.

Here's a brief timeline of Wipro's bonus issues:

A bonus share issue is a corporate action where a company rewards its shareholders by issuing additional shares at no extra cost.

These shares are distributed in a specified ratio to existing holdings, which can potentially enhance liquidity in the market.

Wipro has announced a 1:1 bonus share issue, meaning investors holding one Wipro share will be eligible for an additional bonus share.

This has caused the stock to decline by nearly 50 per cent on the bourses as the price level adjusts for the new shares being issued.

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The company's fourth bonus issue in the past 15 years, this one will be in the form of a 1:1 bonus share issue.

The Board of Directors has fixed Tuesday, December 3, 2024 as the Record Date for determining the equity shareholders eligible for bonus equity shares.

In 2019, Wipro announced a bonus issue in the ratio of 1:3, granting one bonus share for every three shares.

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A 1:1 bonus issue means that investors will receive one additional bonus share for every existing share they hold, effectively increasing the number of shares in circulation and lowering the stock price proportionately.

This type of issue is often used to reward shareholders and increase liquidity in the market. The bonus shares are distributed from the company's free reserves and surplus.

Wipro's 1:1 bonus issue is its fourth in the past 15 years, with previous issues in 2019, 2017, and 2005. The company had also issued 2:1 bonus shares in 1997.

The record date for determining eligible shareholders is December 3, 2024, and the bonus issue will be executed on that date. The ex-date is December 2, 2024, which marks the cut-off date when the Wipro stock starts to trade without the value of the imminent bonus issue.

The bonus issue has caused the stock price to decline by nearly 50% on the bourses, as the price level adjusts for the new shares being issued. However, this fall is only temporary.

Wipro's paid-up equity share capital will increase to around Rs 20,925 crore after the bonus issue, with approximately 10.46 billion equity shares. The company had reserves of Rs 56,808 crore as of September 30, 2024.

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Wipro's share performance has been impacted by the recent bonus issue. The company's stock went ex-bonus on December 3, after a 1:1 bonus share issue was announced.

The bonus issue provides one bonus equity share for every fully paid-up equity share held by shareholders as of the record date, December 3. This marks the 14th bonus issue in the company's history, further strengthening its legacy as a favoured choice in the share market investment space.

Wipro's September quarter results showed a mixed bag of performance, with gross revenue dipping 1% year-on-year to ₹22,300 crore. The company reported a net income of ₹3,210 crore, up 21.3% compared to the same quarter last year.

The IT services segment, Wipro's core business driver, is projected to deliver revenue in the range of $2,607 million to $2,660 million in the upcoming quarter. This translates to a potential sequential change of -2.0% to 0.0% in constant currency terms.

Wipro's stock price has seen a significant decline, with the unadjusted share price dropping by 49.45% as of yesterday's closing. However, after correcting for the bonus issue, the stock was trading 1.09% higher on the BSE at Rs 295.50 at the start of trading.

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Wipro has a long history of rewarding its shareholders with bonus shares. The company has issued bonus shares 13 times, making it the Nifty constituent with the most bonus issues in its history as a public company.

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Wipro first issued bonus shares to its investors in 1971. This was the start of a long tradition of rewarding its shareholders.

The company has rewarded investors with bonus shares six times from 1981 to 1996 and again in 1997, 2004, 2005, 2010, 2017, and 2019. This shows a consistent effort to reward its shareholders over the years.

Wipro has issued bonus shares in various ratios, including 1:01, 2:01, and 1:03. The most recent bonus issue was in 2019, where the company issued one free share for every three shares held by shareholders.

The table below shows Wipro's bonus history:

The company's strong cash position, with cash and cash equivalents of Rs 408.1 bn as of March 2024, supports its consistent bonus history.

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Wipro's revenue growth has been steady, with a Compound Annual Growth Rate (CAGR) of 8.8% from FY20 to FY24.

The company's operating profit margin has been fluctuating between 19% and 24% during this period.

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Wipro's net profit margin has been declining, from 16% in FY20 to 12.4% in FY24.

Here's a summary of Wipro's financial performance over the past five years:

Despite the fluctuations, Wipro has maintained a strong return on equity (RoE) of 17.3% and return on capital employed (RoCE) of 22.1% over the past five years.

Wipro's financial health is a testament to the company's stability and growth. The company's revenue grew at a Compound Annual Growth Rate (CAGR) of 8.8% from FY20 to FY24.

The revenue growth was not consistent across the years, with a dip of 0.8% in FY24. This is a significant drop, but it's essential to consider the overall trend. The company's revenue growth was 3.6% in FY20, 1.3% in FY21, 28.1% in FY22, 14.1% in FY23, and -0.8% in FY24.

Wipro's operating profit margin remained relatively stable, ranging from 19% to 24% across the years. This indicates that the company has managed to maintain its profitability despite fluctuations in revenue.

Here's a breakdown of Wipro's key financial metrics from FY20 to FY24:

Wipro's net profit margin has been declining over the years, from 16% in FY20 to 12.4% in FY24. This indicates that the company's profitability has been impacted by various factors, including the decline in revenue.

Wipro's Q2 FY25 earnings report was released in October, and it largely met analysts' expectations.

The company's net profit rose by 6.9 per cent sequentially to Rs 3,208.8 crore.

This increase in net profit is a significant improvement from the estimated Rs 2,950 crore by Zee Business analysts.

Wipro's IT service margin also improved by 30 bps to 16.8 per cent, exceeding the estimated 16 per cent by Zee Business analysts.

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The record date is the date on which investors' eligibility is decided, and for Wipro's bonus issue, this date is December 2.

A record date is essentially a cut-off point for determining who is eligible to receive bonus shares.

Those who held at least one equity share of Wipro till the record date will be eligible to receive an equal number of bonus shares.

The ex-date of December 3 is the cut-off date when the Wipro stock started to trade without the value of the imminent bonus issue.

This means that the market price of the stock on and after December 3 will reflect the change in the number of shares without the bonus issue.

Wipro's fourth bonus issue in the past 15 years is a 1:1 bonus share issue, meaning investors will receive one bonus share for every share they own.

The price level adjusts for the new shares being issued, which has caused the stock to decline by nearly 50 per cent on the bourses.

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